OpenAI's $6.6 Billion Funding Round Sparks Debate on AI Revolution vs. Bubble
4 Sources
4 Sources
[1]
AI bubble or 'revolution'? OpenAI's big payday fuels debate
Fear of missing out has rocketed the value of artificial intelligence companies, despite few signs as to when the technology will turn a profit, raising talk of AI overenthusiasm. The mystery deepens when it comes to predicting which generative AI firms will prevail, according to analysts interviewed by AFP. ChatGPT-maker OpenAI secured $6.6 billion in a funding round that propelled its valuation to an eye-popping $157 billion, sparking new worries there is an AI bubble poised to burst. "We are in the bubble where all the vendors are running around saying you have to deploy it as the latest digital transformation move," independent tech analyst Rob Enderle of Enderle Group said of generative AI. "I expect this ugly phase for the next two to three years, but then things should settle." To the critics, buyers don't really understand the technology, and the market needed for it to thrive is not mature yet. Enderle also contended that investors are pouring money into generative AI companies with the mistaken notion we are close to technology that has computers thinking the way humans do, called general artificial intelligence. Industry titans Amazon, Google, Meta and Microsoft have thrown their weight behind the technology, entering into partnerships and pushing out products to accelerate adoption. But the tech giants are spending big to provide sometimes flawed features that for now cost them more than they take in from users. The huge investments in OpenAI shows that Big Tech is willing to sink "substantial cash into a company that's dealing with significant operation losses," Emarketer analyst Grace Harmon said of the OpenAI funding round. There's a "lingering fear of underinvesting in AI and losing out...even if investments are not guaranteed to provide returns," she said. Dan Ives, a Wedbush Securities analyst, is one of Wall Street's biggest believers in generative AI's importance and compared ChatGPT's emergence to an "iPhone moment" that will see one trillion dollars in spending during the next three years. An "AI Revolution is not just at our doorstep, but is actively shaping the future of the tech world," he said after OpenAI's historic fund-raise. Wall Street for now stands firmly with Ives and has sent the stock price of AI-chasing tech giants to record levels since ChatGPT burst on the scene in late 2022. Nvidia, the AI-chip juggernaut, in June briefly became the world's biggest company by market valuation amid the frenzy. But according to media reports, OpenAI will lose $5 billion this year on sales of $3.7 billion. The company told investors the pain will be short-lived and that revenue will rise exponentially, hitting a whopping $100 billion in 2029. More than poems? The question is whether people will pay for generative AI services such as Microsoft's CoPilot that depends on OpenAI technology, said Creative Strategies analyst Carolina Milanesi, who pushed back against the idea of an AI bubble. "Consumers are going to start going beyond the write-the-poem-for-me stuff," Milanesi said. "It will become part of our lives and we will depend on it, because we will be forced to." But for now, the generative AI business model is tough, since data center and computing power costs dwarf revenue, according to analysts. Still, Milanesi doesn't think the tech industry is getting carried away with generative AI. "How this shakes out is the way to think about it, not so much the bubble bursting and everyone losing out," Milanesi said. "It's a bit of a Darwin situation where the survival of the fittest is happening," she said. And while there is more excitement about generative AI than real proof of its success, the technology is moving exceptionally fast. "Investors are not sure what the destination is, but everybody is jumping on the boat and they don't want to be left behind," Enderle said.
[2]
AI bubble or 'revolution'? OpenAI's big payday fuels debate
San Francisco (AFP) - Fear of missing out has rocketed the value of artificial intelligence companies, despite few signs as to when the technology will turn a profit, raising talk of AI overenthusiasm. The mystery deepens when it comes to predicting which generative AI firms will prevail, according to analysts interviewed by AFP. ChatGPT-maker OpenAI secured $6.6 billion in a funding round that propelled its valuation to an eye-popping $157 billion, sparking new worries there is an AI bubble poised to burst. "We are in the bubble where all the vendors are running around saying you have to deploy it as the latest digital transformation move," independent tech analyst Rob Enderle of Enderle Group said of generative AI. "I expect this ugly phase for the next two to three years, but then things should settle." To the critics, buyers don't really understand the technology, and the market needed for it to thrive is not mature yet. Enderle also contended that investors are pouring money into generative AI companies with the mistaken notion we are close to technology that has computers thinking the way humans do, called general artificial intelligence. That "holy grail" won't show up until 2030 at the earliest, he said. 'Revolution' is here Industry titans Amazon, Google, Meta and Microsoft have thrown their weight behind the technology, entering into partnerships and pushing out products to accelerate adoption. But the tech giants are spending big to provide sometimes flawed features that for now cost them more than they take in from users. The huge investments in OpenAI shows that Big Tech is willing to sink "substantial cash into a company that's dealing with significant operation losses," Emarketer analyst Grace Harmon said of the OpenAI funding round. There's a "lingering fear of underinvesting in AI and losing out...even if investments are not guaranteed to provide returns," she said. Dan Ives, a Wedbush Securities analyst, is one of Wall Street's biggest believers in generative AI's importance and compared ChatGPT's emergence to an "iPhone moment" that will see one trillion dollars in spending during the next three years. An "AI Revolution is not just at our doorstep, but is actively shaping the future of the tech world," he said after OpenAI's historic fund-raise. Wall Street for now stands firmly with Ives and has sent the stock price of AI-chasing tech giants to record levels since ChatGPT burst on the scene in late 2022. Nvidia, the AI-chip juggernaut, in June briefly became the world's biggest company by market valuation amid the frenzy. But according to media reports, OpenAI will lose $5 billion this year on sales of $3.7 billion. The company told investors the pain will be short-lived and that revenue will rise exponentially, hitting a whopping $100 billion in 2029. More than poems? The question is whether people will pay for generative AI services such as Microsoft's CoPilot that depends on OpenAI technology, said Creative Strategies analyst Carolina Milanesi, who pushed back against the idea of an AI bubble. "Consumers are going to start going beyond the write-the-poem-for-me stuff," Milanesi said. "It will become part of our lives and we will depend on it, because we will be forced to." But for now, the generative AI business model is tough, since data center and computing power costs dwarf revenue, according to analysts. Still, Milanesi doesn't think the tech industry is getting carried away with generative AI. "How this shakes out is the way to think about it, not so much the bubble bursting and everyone losing out," Milanesi said. "It's a bit of a Darwin situation where the survival of the fittest is happening," she said. And while there is more excitement about generative AI than real proof of its success, the technology is moving exceptionally fast. "Investors are not sure what the destination is, but everybody is jumping on the boat and they don't want to be left behind," Enderle said.
[3]
AI bubble or 'revolution'? OpenAI's big payday fuels debate
SAN FRANCISCO (AFP) - Fear of missing out has rocketed the value of artificial intelligence companies, despite few signs as to when the technology will turn a profit, raising talk of AI overenthusiasm. The mystery deepens when it comes to predicting which generative AI firms will prevail, according to analysts interviewed by AFP. ChatGPT-maker OpenAI secured USD6.6 billion in a funding round that propelled its valuation to an eye-popping USD157 billion, sparking new worries there is an AI bubble poised to burst. "We are in the bubble where all the vendors are running around saying you have to deploy it as the latest digital transformation move," independent tech analyst Rob Enderle of Enderle Group said of generative AI. "I expect this ugly phase for the next two to three years, but then things should settle." To the critics, buyers don't really understand the technology, and the market needed for it to thrive is not mature yet. Enderle also contended that investors are pouring money into generative AI companies with the mistaken notion we are close to technology that has computers thinking the way humans do, called general artificial intelligence. That "holy grail" won't show up until 2030 at the earliest, he said. 'Revolution' is here Industry titans Amazon, Google, Meta and Microsoft have thrown their weight behind the technology, entering into partnerships and pushing out products to accelerate adoption. But the tech giants are spending big to provide sometimes flawed features that for now cost them more than they take in from users. The huge investments in OpenAI shows that Big Tech is willing to sink "substantial cash into a company that's dealing with significant operation losses," Emarketer analyst Grace Harmon said of the OpenAI funding round. There's a "lingering fear of underinvesting in AI and losing out...even if investments are not guaranteed to provide returns," she said. Dan Ives, a Wedbush Securities analyst, is one of Wall Street's biggest believers in generative AI's importance and compared ChatGPT's emergence to an "iPhone moment" that will see one trillion dollars in spending during the next three years. An "AI Revolution is not just at our doorstep, but is actively shaping the future of the tech world," he said after OpenAI's historic fund-raise. Wall Street for now stands firmly with Ives and has sent the stock price of AI-chasing tech giants to record levels since ChatGPT burst on the scene in late 2022. Nvidia, the AI-chip juggernaut, in June briefly became the world's biggest company by market valuation amid the frenzy. But according to media reports, OpenAI will lose $5 billion this year on sales of $3.7 billion. The company told investors the pain will be short-lived and that revenue will rise exponentially, hitting a whopping $100 billion in 2029. More than poems? The question is whether people will pay for generative AI services such as Microsoft's CoPilot that depends on OpenAI technology, said Creative Strategies analyst Carolina Milanesi, who pushed back against the idea of an AI bubble. "Consumers are going to start going beyond the write-the-poem-for-me stuff," Milanesi said. "It will become part of our lives and we will depend on it, because we will be forced to." But for now, the generative AI business model is tough, since data center and computing power costs dwarf revenue, according to analysts. Still, Milanesi doesn't think the tech industry is getting carried away with generative AI. "How this shakes out is the way to think about it, not so much the bubble bursting and everyone losing out," Milanesi said. "It's a bit of a Darwin situation where the survival of the fittest is happening," she said. And while there is more excitement about generative AI than real proof of its success, the technology is moving exceptionally fast. "Investors are not sure what the destination is, but everybody is jumping on the boat and they don't want to be left behind," Enderle said.
[4]
AI bubble or 'revolution'? OpenAI's big payday fuels debate
Fear of missing out has rocketed the value of artificial intelligence companies, despite few signs as to when the technology will turn a profit, raising talk of AI overenthusiasm. The mystery deepens when it comes to predicting which generative AI firms will prevail, according to analysts. ChatGPT-maker OpenAI secured $6.6 billion in a funding round that propelled its valuation to an eye-popping $157 billion, sparking new worries there is an AI bubble poised to burst.
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OpenAI's recent $6.6 billion funding round, valuing the company at $157 billion, has ignited discussions about whether we're witnessing an AI revolution or a potential bubble. This story explores the contrasting views of industry analysts on the future of generative AI and its impact on the tech world.
OpenAI's Massive Funding Round Raises Eyebrows
ChatGPT-maker OpenAI recently secured a staggering $6.6 billion in funding, propelling its valuation to $157 billion 1. This astronomical figure has sparked a heated debate in the tech industry: Are we witnessing the dawn of an AI revolution, or are we in the midst of an AI bubble?
The Bull Case: AI Revolution is Here
Some analysts, like Dan Ives of Wedbush Securities, are bullish on AI's potential. Ives compares ChatGPT's emergence to an "iPhone moment" and predicts a trillion dollars in AI spending over the next three years 2. This optimism is reflected in Wall Street's enthusiasm, with AI-focused tech giants seeing their stock prices soar to record levels since ChatGPT's debut in late 2022.
The Bear Case: Signs of an AI Bubble
On the other hand, skeptics point to several concerning factors:
- Lack of profitability: OpenAI is projected to lose $5 billion this year on sales of $3.7 billion 3.
- Immature market: Critics argue that buyers don't fully understand the technology, and the market needed for it to thrive is not yet mature 1.
- Overenthusiasm: Rob Enderle, an independent tech analyst, suggests we're in a bubble phase where vendors are overhyping AI's capabilities 2.
The Role of Big Tech
Industry titans like Amazon, Google, Meta, and Microsoft are heavily investing in AI technology, despite the current lack of profitability 4. This willingness to sink substantial cash into loss-making ventures underscores the perceived importance of AI in shaping the future of tech.
The Business Model Challenge
Currently, the generative AI business model faces significant hurdles. Data center and computing power costs far outweigh revenue, making it difficult for companies to turn a profit 1. However, OpenAI remains optimistic, projecting its revenue to rise exponentially to $100 billion by 2029 3.
The Future of AI Adoption
Carolina Milanesi, an analyst at Creative Strategies, believes that AI will become an integral part of our lives beyond simple tasks like writing poems 2. The key question is whether consumers will be willing to pay for advanced AI services, such as Microsoft's CoPilot, which relies on OpenAI technology.
A Darwinian Scenario
Rather than a bubble bursting, some analysts view the current AI landscape as a Darwinian scenario where only the fittest companies will survive 1. This perspective suggests that while there may be short-term volatility, the long-term potential of AI remains strong.
As the debate rages on, one thing is clear: investors are jumping on the AI bandwagon, driven by a fear of missing out on the next big technological revolution 4. Whether this enthusiasm will be justified by future developments remains to be seen.
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